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Demonstrators gathered Monday outside the Supreme Court as justices kicked off three days of hearings on the health care reform law. Betty Ann Bowser reports then Marcia Coyle and Susan Dentzer discuss the day's proceedings and the core issues of the day's arguments with Gwen Ifill.

JUDY WOODRUFF: The U.S. Supreme Court opened three days of arguments today on the nation’s health care reform law.

NewsHour health correspondent Betty Ann Bowser begins our coverage.

BETTY ANN BOWSER: Supporters and opponents of the Affordable Care Act took to the streets early this morning to make their case to the cameras outside of the court. It was a far cry from the subdued atmosphere that would unfold later in the day inside.

WOMAN: Why do you want to argue?

MAN: Why do you want to argue?

BETTY ANN BOWSER: Emotions have run high since Congress passed the law two years ago backed almost by entirely by Democrats and President Obama.

PROTESTER: When do we want it?

PROTESTERS: Now!

PROTESTER: What do we want?

PROTESTERS: Health care!

BETTY ANN BOWSER: One of its primary goals, provide health insurance to more than 30 million uninsured Americans. The law includes an individual mandate requiring most people to buy insurance or pay a penalty, a question at the heart of the case.

Today, the justices were trying to decide whether they could rule on the mandate before it takes effect in 2014 and whether it should be considered a tax.

The tone of questioning from several justices, including Stephen Breyer, suggested they believed so. Since the two sides both oppose the tax designation, the court appointed a Washington private attorney, Robert Long, to argue in favor.

STEPHEN BREYER, associate justice, U.S. Supreme Court: Why is this a tax?

And I know you point to certain sentences that talk about taxes within the code. And this is not attached to a tax. It is attached to a health care requirement.

ROBERT LONG, attorney: Right.

STEPHEN BREYER: So — so, why does it fall within that word?

ROBERT LONG: Well, I mean, the first point is our initial submission is, you don’t have to determine that this is a tax in order to find that the Anti-Injunction Act applies because Congress very specifically said that it shall be assessed and collected in the same manner as a tax, even if it’s a tax penalty and not a tax. So that’s one argument.

STEPHEN BREYER: But that doesn’t mean the AIA applies.

BETTY ANN BOWSER: The hearings have set the stage for a new round of debate in the court of public opinion.

BETTY ANN BOWSER: Supporters like Ron Pollack of Families USA kicked off a three-day blitz by bringing doctors and nurses to the steps of the court.

RON POLLACK: Two-and-a-half million young adults are receiving coverage through their parents as a result of the legislation. Children with preexisting conditions can no longer be denied health coverage by an insurance company due to their preexisting conditions.

BETTY ANN BOWSER: A coalition of health reform groups has taken over this building across the street from the Supreme Court. The groups have brought in nearly 30 radio talk show hosts to broadcast during the three days of arguments.

When the Affordable Care Act was passed in 2010, Americans were sharply divided over whether it was a good or a bad idea. Today, that is still the case. And the individual mandate has never been more unpopular. A recent ABC News/Washington Post poll found that 67 percent of those surveyed want the Supreme Court to strike the mandate down.

PROTESTERS: Repeal the law! Repeal the law!

BETTY ANN BOWSER: No group is more opposed to the individual mandate than the coalition of conservative organizations holding rallies and news conferences this week.

Over the weekend, about 400 demonstrators stood for over two hours in the pouring rain near the Supreme Court to demand the justices find the mandate unconstitutional.

LAURA VANOVERSCHELDE, opposes Affordable Care Act: If the justices do not listen to — they are not really upholding their oath of office to the Constitution and the people that expect the Constitution to be upheld.

WOMAN: Obamacare is like cancer.

BETTY ANN BOWSER: Jenny Beth Martin, who leads the Tea Party Patriots, says the week’s events aren’t just about the Supreme Court.

JENNY BETH MARTIN, co-founder, Tea Party Patriots: We at Tea Party Patriots have promised that we will fight this law and we will get it repealed. And that is what we intend to do. And we’re not putting all of our eggs in any one basket.

BETTY ANN BOWSER: Virginia Attorney General Ken Cuccinelli filed one of the earliest lawsuits challenging the mandate. That case is not part of the one being heard this week. And while he is taking part in some of the media events, he agrees that opponents of the law have a broader message.

Do you expect any of this activity, whether it’s supporters of the law or opponents to the law, have any influence on what’s going on inside the court?

But I do expect it to have an influence on this year’s elections, and both the election for president, the elections for the U.S. Senate. So this has a lot of implications well beyond just the case, because ultimately we got here because of choices people made in elections.

BETTY ANN BOWSER: But Republicans and Democrats are using this moment to mobilize their bases. Republican presidential candidate Rick Santorum showed up outside the court today.

RICK SANTORUM (R): There’s no more important issue on the most fundamental issues of the day, which is our economic security and stability, job growth, the size and scale of government.

BETTY ANN BOWSER: And both parties are mounting major campaigns on the airwaves and online. The Republican National Committee is airing this ad in six battleground states. And the passage of the law was a major focus of a video produced by the Obama campaign earlier this month.

PRESIDENT BARACK OBAMA: When my mom got cancer, she wasn’t a wealthy woman and it pretty much drained all her resources.

MICHELLE OBAMA, first lady: She developed ovarian cancer, never really had good, consistent insurance.

BETTY ANN BOWSER: While the court hears the case this week, President Obama is attending a nuclear security conference in South Korea. So selling the law has been left to surrogates.

NEERA TANDEN, president, Center for American Progress: It’s important for us to remember what those benefits are.

BETTY ANN BOWSER: Neera Tanden was a health policy adviser for the Obama administration. Now, as president of the Center for American Progress, she’s trying to persuade people the Affordable Care Act will benefit many Americans. But she says it’s a hard sell because the White House had to make significant compromises to get the law passed and still managed to get only one Republican vote.

NEERA TANDEN: It has become a very polarizing issue, in part because of the way the legislation was passed and the procedural challenges. Sausage-making in Congress is never pretty. And that was particularly unpretty, particularly unattractive sausage-making, the process of the Affordable Care Act.

BETTY ANN BOWSER: More than 150 from the general public had an opportunity to hear the arguments today. The lines are already forming again for tomorrow.

GWEN IFILL: For a closer look at what’s going on with the impact of the law and at what happened inside the courtroom today, we’re joined by the team covering the arguments for us this week, Marcia Coyle of The National Law Journal and NewsHour health analyst Susan Dentzer, editor-in-chief of the journal Health Affairs.

As Betty Ann was just explaining, this is a big, big issue, but today there were fairly narrow arguments, Marcia, pretty much about jurisdiction. Why wouldn’t the court have jurisdiction?

MARCIA COYLE, The National Law Journal: First of all, you’re absolutely right.

This was really more of a meat-and-potatoes argument for the Supreme Court. When is a statute a jurisdictional statute that would deprive them of the power to consider the merits of the arguments here and also, when is a penalty a tax or not? This issue came up in the lower courts.

One federal court of appeals actually held that the Anti-Injunction Act of 1867 did bar federal courts from considering the merits of this litigation. And a judge on another federal appellate court also ruled that way. So the court felt it had to answer this very threshold question.

GWEN IFILL: The difference between a penalty and a tax is what, according to the arguments today?

MARCIA COYLE: Well, there were three lawyers arguing today.

The first lawyer, it’s the court-appointed lawyer, and he was asked by the court to make the argument that this law does bar the federal courts from considering the litigation. And he said that the penalty for not having minimum essential health insurance coverage really is, in all intents and effect, a tax. It operates that way.

Even though it’s called a penalty in the law, that doesn’t matter because the tax code doesn’t define tax. And there are other penalties within the tax code that operate as taxes.

GWEN IFILL: We got to actually hear some audio from inside the court. Their arguments, usually, only you get to hear.

ELENA KAGAN, associate justice, U.S. Supreme Court: It’s your choice. Either buy insurance or pay a — or — or pay a fee. But that’s not the way the statute reads.

And Congress, it must be supposed, you know, made a decision that that shouldn’t be the way the statute reads. That is should instead by a regulatory command and a penalty attached to that command.

ROBERT LONG: Well, I — I would not argue that this statute is a perfect model of clarity, but I do think the most reasonable way to read the entire statute is that it — it does impose a single obligation to pay a penalty if you are an applicable individual and you’re not subject to an exemption.

GWEN IFILL: Not a perfect model of clarity, even Justice Scalia was making that same point today in this argument. So how much does that affect what we’re actually arguing about, the fact that everybody seemed to be kind of muddling through the definitions?

MARCIA COYLE: Well, as Justice Scalia pointed out, the court interprets very narrowly jurisdictional statutes, statutes that take away their power to review. And he said it has to be clear in the statute, and it is not clear at all here.

And so the general sense of the justices was that this act will not apply to this penalty, even if it is a jurisdictional statute. As the government argued today, this penalty is different. It doesn’t operate like a tax.

GWEN IFILL: There’s a practical side to this argument, Susan, which — and it played out in one interesting exchange today between Solicitor General Verrilli and Justice. . .

SUSAN DENTZER: That was Justice Alito.

GWEN IFILL: Justice Alito, right. And they were arguing about what happens if you go to an emergency room and you qualify for Medicaid, you’re not on Medicaid? Does someone force you to do it?

SUSAN DENTZER: That was another kind of confusing moment, because, indeed, Justice Alito said if you’re eligible for Medicaid and you’re not enrolled in Medicaid, but you go to an emergency room when this law is in effect, would you — would the hospital have to enroll you in Medicaid? That’s literally what he asked.

Solicitor General Verrilli said no. It seemed as if he thought he was being asked about the penalty. The actual facts are, under the law, if you are — you are obligated — if you are eligible for Medicaid, you are obligated to enroll in Medicaid as of 2014. You would not have the pay the penalty, however, for not being enrolled.

Those people who are not paying taxes, are not taxpayers, technically do not have to pay the penalty.

GWEN IFILL: Employers are watching this awfully closely, aren’t they, because they were already — this is already law? This is something they’re already supposed to be on the way to implementing. So they’re not waiting for the Supreme Court telling them what to do.

SUSAN DENTZER: Everybody is watching this very closely, mainly because of course, as we know, on day three people are going to be talking about whether the issue of severability applies.

That is to say, if the individual mandate for some reason is found unconstitutional, does the whole law go down along with it? It doesn’t look as if the justices will rule that way. It’s a big, big law. There are many, many sections that have nothing to do with either insurance reform or with the individual mandate or even employer mandates.

So — but people are still nervous about this. And until the court issues the final ruling and says this, that or on the other on these issues of the individual mandate or severability, people are watching.

GWEN IFILL: Well, it’s interesting, because even though the justices spent a lot of time talking about the details of this tax and penalty and definition, none of them seemed to think like they weren’t — or seemed to be behaving like they weren’t going to take this case.

So, they were looking forward a little bit to this mandate argument we’re expecting tomorrow. I want to ask you about that, but I also want to play a little bit of the audio from an exchange between Chief Justice Roberts and Gregory Katsas, who was one of the attorneys who was representing the small business folks.

MARCIA COYLE: Right.

JOHN ROBERTS, chief justice of the U.S. Supreme Court: The whole point of the suit is to prevent the collection of penalties.

GREGORY KATSAS, attorney: Of taxes, Mr. Chief Justice.

JOHN ROBERTS: Well, prevent the collection of taxes, but the idea that the mandate is something separate from whether you want to call it a penalty or a tax just doesn’t seem to make much sense.

JOHN ROBERTS: It’s a command. A mandate is a command. Now, if there’s nothing behind the command, it’s sort of, well, what happens if you don’t follow the mandate, and the answer is nothing, it seems very artificial to separate the punishment from the crime.

GWEN IFILL: So, talking about the punishment and the penalty was leading naturally to the discussion about whether this is a mandate or not.

MARCIA COYLE: Well, a little bit.

The challengers here argue that, at least in terms of the Anti-Injunction Act, that they are not challenging the penalty in their lawsuit. They are challenging the mandate.

GWEN IFILL: Right.

MARCIA COYLE: And Chief Justice Roberts doesn’t see how you can separate the two.

And he did announce at the end that, tomorrow, we would be back in the courtroom to hear the next arguments. And they are about the mandate. Justice Alito at one point did sort of pointedly tease the solicitor general, saying, well, today, you’re arguing that the penalty is not a tax. And, tomorrow, you’re going to argue that the mandate is a tax.

And the government has a very clear argument here, that it involves — these involve two very different analyses. In the case of the Anti-Injunction Act, the court is interpreting a statute and looking at the language of a statute and how it applies to penalties and/or taxes. But, tomorrow, the court is going to be looking at a constitutional argument, Congress’ taxing power. And it’s a very different kind of analysis.

GWEN IFILL: And, as a result, you had two attorneys vs. one today. It was kind of unusual to have three attorneys arguing before the court.

MARCIA COYLE: Well, this is because the government as well as the challengers both agreed that the Anti-Injunction Act doesn’t apply here. So the court wanted to hear the other side of the argument. And that’s why they appointed Mr. Long to make that argument.

GWEN IFILL: Susan, what is already law? What is already in effect? We know that the law is enacted. And we know that it’s rolling out slowly. But as this challenge goes before the court, some things are already real.

SUSAN DENTZER: Yes, indeed.

Dozens of provisions have already gone into effect because, of course, there is much that has nothing to do with the individual mandate or with insurance reform. For example, under Medicare, some changes were made in the law that are already in effect, so that last year alone, a number of Medicare beneficiaries who had hit the infamous donut hole in the Medicare drug coverage were eligible for 50 percent discounts on their brand name drugs once they got the donut hole.

In fact, about 3.4 million beneficiaries, according to the government, got about $2 billion of assistance that way. There is some insurance market reforms that are already in effect. For example, we know that individuals can stay on their parents’ policies now up to age 26, and also that preexisting condition restrictions cannot be held against children on policies.

There’s a whole other set of provisions in the law that are all about what’s called the triple lane, getting us to better health, better health care at lower costs. And those are innovations in the way we pay health care providers and the way those services are delivered.

And a number of experiments under that part of the law have — are playing out. So, for example, accountable care organizations, 32 major organizations have moved forward as pioneer ACOs, as it’s called, to innovate around ways of delivering care and actually drive the costs down.

And throughout the law, there are other innovations that are already rolling out.

GWEN IFILL: Is this already hurting — or are states arguing, these states arguing that this has already created a hardship for them financially?

SUSAN DENTZER: Not at all, because, of course, the big dollars for the states are going to come in really down the road, and not even — if we just step back on the argument of the Medicaid expansion, the federal government picks up 100 percent of the cost of the Medicaid expansion for a couple of years.

So it will be quite some time before the states are experiencing even serious expenditures on the Medicaid portion. . .

GWEN IFILL: But aren’t some states also saying that they still are being forced to pick up some of the extra — the things that the government doesn’t cover?

MARCIA COYLE: I think some states are seeing some costs in terms of setup, getting ready for the act.

But I haven’t heard any major complaints yet about states experiencing heavy costs. And even with the Medicaid, as Susan pointed out, the government pays 100 percent until 2016. And then its share decreases gradually until 2020, when it stabilizes at 90 percent of the cost.

GWEN IFILL: So people are already in line for the big mandate argument tomorrow?

MARCIA COYLE: They are. Some are staying from today, just spending the night, hoping to get into the courtroom.

GWEN IFILL: Well, we will be back to talking about it all right here, same time, same place.

Thank both very much.

SUSAN DENTZER: Thanks, Gwen.

MARCIA COYLE: My pleasure, Gwen.

GWEN IFILL: We will have much more about this week’s arguments online, where you can listen to audio of all today’s proceedings or read the transcript.

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